Tag Archives: Social Science

Efficiency Disclaimers

By Robin Hanson · March 16, 2010 2:00 pm · Comments (4)

Though I generally avoid disclaimers, since Bryan Caplan calls my latest claim that econ efficiency is a good tool for finding win-win deals “compete nonsense,” let me try to clarify:

  • We have many purposes when we talk about “what to do”, and making deals is only one of our purposes.
  • Getting what we want is only one of many reasons we try to achieve deals; we also want to signal our features, for example.
  • Analysis aids are only one of many sorts of aids that can help us to make deals; aids can also to organize negotiations, enforce deals, etc.
  • Most useful deal aids are relatively specific to a particular context, such as real estate sales, or marriages; when available, more specific tools tend to be more useful.
  • Deal aids can specialize in what groups that they best assist.  A particular aid might be best suited for couples, club, firms, or nations.  Wider aids specialize in assisting larger groups.

Economic efficiency is our best wide general analysis tool for finding win-win deals that get people what they want.  That isn’t everything, but it is a lot.  I’m glad I mastered this tool and am eager to apply it.  Efficiency can:

  • Suggest Deals – Efficiency analysis suggests policies to make “the biggest pie.” A deal also needs folks to agree on a way to divide the pie, such as via cash transfers between the parties.  Even so, knowing better ways to make bigger pies should make parties more eager to agree to deals to lock in such gains.
  • Be Part Of A Deal -  Groups can make explicit deals to adopt the results of efficiency analysis.  For example, legal systems can adopt a general accident rule that puts responsibility on the least cost accident avoider, and government agencies can be instructed to make policy decisions on a cost-benefit basis.  Most can reasonably expect to gain from such policies, even if they do not expect to gain from each particular application.

Admittedly:

  • Efficiency analysis is a rough guide, and does not determine exact implications with certainty for each possible situation.
  • The policies efficiency recommends depend on particular modeling assumptions and parameter estimates, for example, and those depend on particular analysts and sources used.
  • Even when negotiators have access to solid analyses, deals can fail for many other reasons; good analysis doesn’t ensure good deals.
  • Most deals are not between all possible parties, and each deal may well disadvantage those not included in the deal.
  • People may expect to gain from a deal, but end up not actually benefiting.
  • As a wide general tool, efficiency is less useful for small deals or for contexts where specialized tools are available.
  • Efficient deals may well be immoral, or unattractive for other purposes of deal-making, or of “what to do” talking.

Few deals can guarantee to get everyone more of what they want, but by encouraging and enabling more better wider deals, the use of efficiency analysis sure seems to me to tend to get most everyone more of what they want.  Isn’t that good enough?

OK, now that I’ve tried this exercise of explicitly listing many possible disclaimers, when is this sort of exercise actually worth the effort?

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Efficient Isn’t Moral

By Robin Hanson · March 15, 2010 12:00 pm · Comments (23)

Efficiency isn’t morality, and it is a serious confusion to think it should be. Let me try again to explain.  I said:

Economic welfare cares not about giving people experiences but about satisfying their preferences. … If we do something a dead person would have wanted, that counts as a benefit.

Adam Ozimek responded:

But we care about satisfying people’s preferences because, unlike the dead, they can know that those preferences being satisfied. … If were going to count the preferences of the non-existent, then it would seem that the number one priority of all society would be to bring as many of them as possible from non-existence into existence. The easiest way to do this is to mandate pregnancy. … If we care about satisfying the preferences of the dead even though they won’t know their preferences are satisfied, does that mean we should not be concerned with whether or not living people know when their preferences are satisfied?

Adam reminds us of Tyler’s position:

Dead people don’t count in the social welfare function. (If they did, how many of them would prefer non-democratic or racist outcomes?  And would we count that?  We shouldn’t and we don’t.)

When our distant ancestors sat around debating if to change locations, expel a troublemaker, or attack neighbors, they were often ambiguous about whether they were choosing what they wanted or what was moral; they preferred to pretend these were the same.  We similarly prefer ambiguity when we argue policy today.

So it is important to clarify: As an analysis tool, economic efficiency is designed and well-suited to finding win-win deals that [added: tend to] get us all more of what we want. It is not well-suited to achieving moral outcomes, except when morality happens to coincide with getting people what they want.  Otherwise, win-win deals will predictably not achieve morality when many involved do not want to be moral.

Many of us want things we will never experience directly; we want our children to prosper after we are gone, for example. This is especially true of our moral wants; we want our donations to Africa to actually help real Africans. So we are understandably wary of deal-making frameworks which explicitly suggest that they seek only to achieve the appearance, not the substance, of our wants.  So yes, a deal-finding analysis tool should definitely count unseen wants!  Furthermore, observers concerned that deals might neglect morals should be especially eager for our deals to achieve unseen wants.

Frameworks for finding win-win deals should also try to include as many things as possible that can have wants and participate in deals.  This includes racists, pedophiles, slaves-owners, robots, animals, distant past and future folk, and future folk who may or may not end up existing.  Yes many may be morally offended if racists get what they want, but that offense counts in what other folks want, and therefore enough offense will ensure that win-win deals will not give racists much of what they want.

Limits on contract may distort prices and interfere with the ability of efficiency analysis to help us find useful win-win deals.  But that is a good reason to enforce more kinds of deals, not to try to distort efficiency for a task to which it is poorly suited: choosing moral acts.

Added: Bryan Caplan responds.

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Is The City-ularity Near?

By Robin Hanson · February 9, 2010 1:00 pm · Comments (36)

The land around New York City is worth a lot.  A 2008 analysis estimated prices for land, not counting buildings etc., for most (~80%?) of the nearby area (2750 square miles, = a 52 mile square).  The total New York area land value (total land times ave price) was 5.5T$ (trillion) in 2002 and 28T$ in 2006.

The Economist said that in 2002 all developed nation real estate was worth 62T$.  Since raw land value is on average about a third of total real estate value, that puts New York area real estate at over 30% of all developed nation real estate in 2002!  Whatever the exact number, clearly this agglomeration contains vast value.

New York land is valuable mainly because of how it is organized.  People want to be there because they want to interact with other people they expect to be there, and they expect those interactions to be quite mutually beneficial.  If you could take any other 50 mile square (of which Earth has 72,000), and create that same expectation of mutual value from interactions, you could get people to come there, make buildings, etc., and sell that land for many trillions of dollars of profit.

Yet the organization of New York was mostly set long ago based on old tech (e.g., horses, cars, typewriters).  Worse, no one really understands at a deep level how it is organized or why that works so well.  Different people understand different parts, in mostly crude empirical ways.

So what will happen when super-duper smarties wrinkle their brows so hard that out pops a deep math theory of cities, explaining clearly how city value is produced?  What if they apply their theory to designing a city structure that takes best advantage of our most advanced techs, of 7gen phones, twitter-pedias, flying Segways, solar panels, gene-mod pigeons, and super-fluffy cupcakes?  Making each city aspect more efficient makes the city more attractive, increasing the gains from making other aspects more efficient, in a grand spiral of bigger gains.

Once they convince the world of the vast value in their super-stupendous city design, won’t everyone flock there and pay mucho trillions for the privilege? Couldn’t they leverage this lead into better theories enabling better designs giving far more trillions, and then spend all that on a super-designed war machine based on those same super insights, and turn us all into down dour super-slaves?  So isn’t the very mostest importantest cause ever to make sure that we, the friendly freedom fighters, find this super deep city theory first?

Well, no, it isn’t.  We don’t believe in a city-ularity because we don’t believe in a super-city theory found in a big brain flash of insight.  What makes cities work well is mostly getting lots of details right.  Sure new-tech-based cities designs can work better, but gradual tech gains mean no city is suddenly vastly better than others.  Each change has costs to be weighed against hoped-for gains.  Sure costs of change might be lower when making a whole new city from scratch, but for that to work you have to be damn sure you know which changes are actually good ideas.

For similar reasons, I’m skeptical of a blank-slate AI mind-design singularity.  Sure if there were a super mind theory that allowed vast mental efficiency gains all at once, but there isn’t.  Minds are vast complex structures full of parts that depend intricately on each other, much like the citizens of a city.  Minds, like cities, best improve gradually, because you just never know enough to manage a vast redesign of something with such complex inter-dependent adaptations.

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Coordination Is Hard

By Robin Hanson · February 2, 2010 8:50 am · Comments (36)

When we tell our limited-government friends that we have written a book … about how government can better accomplish what it sets out to do, the reaction is often horror.  “I don’t want to make government work better, I want it to go away” … This way of thinking is deeply misguided. … This is not to disparage the argument that government is too large, for which the case is strong. But holding government in sneering contempt is a misinformed corruption of that sentiment.

More here.  Will Wilkinson agrees, as do I.  Two ideological attitudes are common, but insensibly stupid:

  1. All government activity is bad, no matter what it does.
  2. The only reason to oppose a government program with a purported goal is because that goal is bad; program opponents must oppose its goal.

The key thing to understand is: governance is hard, especially in a democracy.  Fundamentally, this is because coordination is hard.

It can be very hard for even a single owner to coordinate with a dozen subordinates that each coordinate with a dozen employees in an ordinary firm to achieve a simple clear goal like making and selling a simple product at a profit. Organizations fail at this task all the time, and for thousands of different reasons.  Most new organizations attempting this fail, and most that are succeeding now will fail in a few decades.  When they fail, they will fail so badly that it will not be worth trying to save them; better to throw them away and start anew.

Once one appreciates the difficulty of coordinating even small organizations, and that bigger coordination is harder, one can see why it can be extremely difficult to manage the vaster coordination required by government.  How can ordinary citizens continue over centuries to coordinate to support interest groups that coordinate to support politicians who coordinate to approve and manage policies that empower agency heads to coordinate to manage thousands of agency employees to achieve the vague incoherent goals of many millions of citizens?

Types of government activities vary both in how valuable are their possible impacts, and it how difficult is their coordination task (both relative to private coordination and to doing nothing).  If your politics were about policy, and you were reasonable, then you’d support programs with high value impacts and easy coordination, and oppose programs with low value impacts and difficult coordination.  Ideologues who oppose all government programs no matter how valuable or easy, or who support all programs with laudable goals no matter now difficult their coordination task just don’t get it.  That might signal their values and blind faith or hatred in leaders, but not their reason.

One can more reasonably disagree about the value of possible impacts, and about the coordination difficulties of particular programs.  But reasonable people should also admit others may hold different values, and that coordination techs continue to improve, both in and out of government.  New ways to coordinate government can make its programs more reasonable, and new ways to coordinate private action can make once-reasonable government programs obsolete.  We should also keep trying new programs, just to see.  The devil, as always, is in the details.

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Helpful Inequality

By Robin Hanson · January 10, 2010 11:00 am · Comments (30)

We find significant and sizeable negative peer effects arising from students at the very bottom of the ability distribution, but little evidence that the average peer quality and the very top peers significantly affect pupils’ academic achievements.

More here.  Thus we’d probably do better to isolate the worst kids in their own school or work hell; they’d be worse off but the gains to other students would more than compensate.  At the other end of the status spectrum, the number of new businesses we get seems limited by the number of folks personally wealthy enough to start new businesses.  So having more really rich folks benefits everyone via innovation.  Details here:

Since richer entrepreneurs make larger investments and expect to have more wealth in the future, it is the relatively poor entrepreneurs who decide to take more risk and would be more likely to exit from business in the future. As a result, the model predicts that survival of entrepreneurial business is positively related to entrepreneurial assets, which is consistent with empirical findings. … Since agents enter entrepreneurship with relatively low wealth levels, our model also implies that young businesses exhibit lower survival rates, and, conditional on survival, small (younger) firms grow faster than larger (older) ones. All these implications are in line with strong empirical evidence from the literature on firm dynamics.

I’m not saying these are the only issues for how much inequality we want, but they seem to me neglected issues.

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Will Tyler Tell?

By Robin Hanson · January 5, 2010 11:50 am · Comments (9)

Bryan Caplan:

Book projects I wish my other colleagues would pursue. …  Tyler Cowen should write that I call a “book of answers” with the working title Social Intelligence: What I Know About People That You Don’t. The key point of departure: The goal of the book is not to “get readers to ask themselves questions,” but to convey definite answers that Tyler defends without irony.  If you think this goes against his nature, I’ve seen him do this many times first-hand – just not in print.

Yep.  If you want to predict what real people will do, or explain why they do what they do, I know of no better person to ask than Tyler Cowen.  There’s no great rush, and Tyler has many other ways to spend his time, but the world will suffer a great loss if Tyler does not publish his concrete penetrating insight in a coherent organized form.  I’m not at all sure the world will reward him on net for such honesty, but it would still be his greatest contribution.  (Bryan’s advice for me here.)

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This Isn’t News

By Robin Hanson · January 3, 2010 10:05 am · Comments (6)

To those with a good basic econ education, it isn’t news that the world economy continues to grow.  Nevertheless, it is worth remembering and repeating from time to time.  Tyler Cowen:

It may not feel that way right now, but the last 10 years may go down in world history as a big success. … Steady economic growth is an underreported news story — and to our own detriment. As human beings, we are prone to focus on very dramatic, visible events, such as confrontations with political enemies or the personal qualities of leaders, whether good or bad. We turn information about politics and economics into stories of good guys versus bad guys and identify progress with the triumph of the good guys. In the process, it’s easy to neglect the underlying forces that improve life in small, hard-to-observe ways, culminating in important changes.

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Real Science

By Robin Hanson · December 31, 2009 1:30 pm · Comments (52)

Fascinating observations from watching real science in action.  Half of data conflicts with theoretical expectations:

Although the researchers were mostly using established techniques, more than 50 percent of their data was unexpected. (In some labs, the figure exceeded 75 percent.) … “The results kept contradicting their theories. It wasn’t uncommon for someone to spend a month on a project and then just discard all their data because the data didn’t make sense.” …

There were models that didn’t work and data that couldn’t be replicated and simple studies riddled with anomalies. “These weren’t sloppy people,” Dunbar says. “They were working in some of the finest labs in the world. But experiments rarely tell us what we think they’re going to tell us. That’s the dirty secret of science.” …

Most such anomalies are just ignored:

The vast majority of people in the lab followed the same basic strategy. First, they would blame the method. The surprising finding was classified as a mere mistake; perhaps a machine malfunctioned or an enzyme had gone stale. … The experiment would then be carefully repeated. Sometimes, the weird blip would disappear, in which case the problem was solved. But the weirdness usually remained, an anomaly that wouldn’t go away.  …

Even after scientists had generated their “error” multiple times — it was a consistent inconsistency — they might fail to follow it up. “Given the amount of unexpected data in science, it’s just not feasible to pursue everything.” …

Marginalized folks contribute more to innovation:

Thorstein Veblen was commissioned … to write an essay on how Jewish “intellectual productivity” would be changed if Jews were given a homeland. … [he] argued instead that the scientific achievements of Jews — at the time, Albert Einstein was about to win the Nobel Prize and Sigmund Freud was a best-selling author — were due largely to their marginal status.  … They were able to question everything, even the most cherished of assumptions. …

Diversity induces far view talk, which finds creative answers:

The diverse lab, in contrast, mulled the problem at a group meeting. None of the scientists were protein experts, so they began a wide-ranging discussion of possible solutions. …. “After another 10 minutes of talking, the protein problem was solved.” .. The intellectual mix generated a distinct type of interaction in which the scientists were forced to rely on metaphors and analogies to express themselves. … These abstractions proved essential for problem-solving, as they encouraged the scientists to reconsider their assumptions. Having to explain the problem to someone else forced them to think, if only for a moment, like an intellectual on the margins, filled with self-skepticism.

Thorstein Veblen is under-appreciated, as is how weak are our theories.  How much innovation do we lose because Jews are no longer on the margin?  Hat tip to R0bert Koslover.

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Whence Scale Diseconomies?

By Robin Hanson · December 27, 2009 12:45 am · Comments (19)

For good or evil, one of our greatest legacies will be global governance:

Our institutions of global governance may grow, follow us as we expand, and entrench themselves forever. On the downside, they might perpetuate themselves even if they hurt our descendants on net. On the upside, we might use them to overcome key coordination failures.

What will determine the breadth and strength of future global governance? Ideology and public opinion will play a part, but more important is probably organizational innovation; we’ll need better mechanisms to make it work.

As I’ve mentioned before, our use today of larger scale government is limited by the fact that local governments are usually more efficient.  The recent failure to create a global climate treaty offers a vivid example; central coordination is typically slow, expensive, and error prone.  So I doubt we’ll use central government to coordinate much more than we do now, until we learn how to do that more effectively.

While ancient empires sometimes covered wide areas, they didn’t get much involved in most activities, as long as tribute was paid.  Similarly, most ancient businesses were small scale.  But organizational innovations over the centuries have enabled both larger firms and larger governments.  Governments today get involved in more areas of life, and do so at larger scales; issues that were once private or municipal are now national or international.  This trend may or may not continue.

To avoid ideological distractions, let’s focus on how this plays out in business.  In particular, consider organizational economies and diseconomies of scale. Economies of scale are ways in which a larger organization are more efficient that smaller ones.  For example, larger organizations can produce using larger plants, share coordinated distribution networks, or share broader reputations.

Diseconomies of scale are ways in which larger organizations are less efficient that smaller ones.  Those not very familiar with large organizations often find it hard to imagine such diseconomies exist, and this failure of public imagination is arguably a big reason governments are often too large.  This review lists Williamson’s four factors hurting larger firms: Continue Reading "Whence Scale Diseconomies?" »

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Long Legacies

By Robin Hanson · December 23, 2009 2:00 pm · Comments (22)

How might what we do today influence the lives of our distant descendants, slowly-changing lives well adapted to their world, long after our dreamtime has passed?  I see seven long LEGACIES:

  • L – Lag – We can delay when that future begins in full.  A slower economic growth rate, or a lack of early investment in pivotal techs, could delay by a few decades, while a drastic but not total collapse could delay it for longer.
  • E – Existence – We can do things now to reduce the chance of a full and permanent civilization collapse.  Even if this chance is only 1%, reducing that chance to 0.5% would be a huge benefit our descendants.
  • G – Government – Our institutions of global governance may grow, follow us as we expand, and entrench themselves forever.  On the downside, they might perpetuate themselves even if they hurt our descendants on net.  On the upside, we might use them to overcome key coordination failures.
  • A – Ancients – Particular entities, such as particular people, races, cities, or planets, may over time collect enough resources to perpetuate themselves indefinitely.  If only modestly less efficient than newer substitutes, saved resources could make up for this deficit.  They might hold physical resources with a defensive military advantage, or might own property protected by a shared entrenched legal system.
  • C – Crossroads – We can become so invested in the particular spatial arrangements we use to coordinate our activities, such as particular roads, cities, or communication lines, that we can’t afford to individually switch to more efficient arrangements, and can’t manage to coordinate to switch together.  For example, Earth’s first space elevator location might retain the most off-planet transport, or Sol might remain a hub of galactic fashion news.
  • I – Info – We can save info for them about what actually happened during our epically strange dreamtime era.   They can run sims to guess, but would really want to know.
  • E – Existence – This is mentioned twice, as it matters more than any other.
  • S – Standards – We can become so invested in the conventions, interfaces, and standards we use to coordinate our activities that we each can’t afford to individually switch to more efficient standards, and we also can’t manage to coordinate to switch together. Conceivably, the genetic code, base ten math, ASCII, English language and units, Java, or the Windows operating system might last for trillions of years.

I’ll post more about these over the next few days.

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